SHRI KUMAR COOPERATIVE HOUSING SOCIETY LTD,MUMBAI V. JAO MUM -W-22(3)(1), MUMBAI

ITA 5581/MUM/2024

AI Insights

The case involves Shrikumar Co-operative Housing Society Ltd., which appealed against the disallowance of a deduction claim of Rs. 12,05,880 under Section 80P(2)(d) of the Income Tax Act, 1961. The deduction was initially denied by the Central Processing Centre, Bengaluru, and upheld by the Commissioner of Income-tax (Appeals). The primary contention was whether the interest income derived from Cooperative Banks qualifies for deduction under Section 80P(2)(d), given that these banks are registered under the Maharashtra Cooperative Societies Act, 1960. The Tribunal considered various judicial precedents and the specific provisions of the Banking Regulation Act, 1949, to determine the nature of the business conducted by the Cooperative Banks.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 471349 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2021-2022
• Other Referred Cases: PCIT v. The Totagars Co-operative Sale Society Sirsi, GSSS Credit Co-operative Society Ltd. v. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRAVIN SALUKHE.
• Assessee Lawyers: VIDYADHAR N. KHANDEKAR; WAY OF VARIOUS DECISIONS OF; WAY OF VARIOUS DECISIONS OF; WAY OF VARIOUS DECISIONS OF; INVOKING SECTION P; RATIVE BANK IS NOT
• Keywords: Business income
• Section: 143(1); 56; 139(1); 80P

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “H (SMC)” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI RAHUL CHAUDHARY (JUDICIAL MEMBER) ITA No. 5581/MUM/2024 Assessment Year: 2021-22 Shrikumar Co-operative Housing Society Ltd., Nehru Road, Santacruz (East), Mumbai-400055. Vs. Asst. Dir. Of I. Tax, CPC JAO MUM- W-22(3)(1), Piramal Chamber, Mumbai-400012. PAN NO. AAAAS 8110 J Appellant Respondent Assessee by : Mr. Vidyadhar N. Khandekar, CA Revenue by : Shri Pravin Salukhe. Sr. DR Date of Hearing : 16/01/2025 Date of pronouncement : 21/01/2025 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against order dated 31.08.2024 passed by the Ld. Commissioner of Income-tax (Appeals) [in short ‘the Ld. CIT(A)’] for assessment year 2021-22, raising following grounds: Disallowance of Rs. 12,05,880 u/s. 80P(2)(d) of the Act being Interest Income derived from Cooperative Banks : 1. The Id C.I.T. (Appeals) erred in upholding the u/s 143 (1) dated 30/09/2022 disallowing a sum of Rs. 12,05,880/- being Interest Income derived from Cooperative Banks without appreciating that Cooperative Banks registered under Maharashtra Cooperative Societies Act, 1960 are Cooperative Society and as such Interest Income derived by the Appellant is eligible for deduction U/s 80P(2)(d) of the Act. and therefore disallowance ought to be deleted. 2. The Id C.I.T. (A) erred in not granting the relief U/s 80P(2)(d) despite the fact that the Chapter VIA r.w.s. 80AC of the Act insofar as the Return of Income was filed within the due date prescribed U/s 2. Briefly stated, facts of the case are that the assessee filed its return of income Rs.12,110/- after claiming deduction of Rs.12,05,883/ of interest from the Co of the Income-tax Act, 1961 (in short ‘the Act’). The return was processed by the Central Processing Centre, Bengluru and in the intimation order passed u/s 143(1) of the Act, t of deduction u/s 80P(2)(d) of the Act. Aggrieved, the assessee filed appeal before the Ld. CIT(A) and submitted that issue in dispute was covered in favour of the assessee by way of various decisions of the Co-ordinate Benches of the Tribunal the contention that interest received from co eligible for deduction for the reason that those co are primarily co-operative society. The relevant finding of the Ld. CIT(A) is reproduced as under: “5.1.The Ground No. 1 of appeal is related to the non of deduction under Section 80P by the order u/s 143(1) passed by CPC with intimation date of 30.09.2022. The appellant has Shrikumar Co- The Id C.I.T. (Appeals) erred in upholding the Intimation Order u/s 143 (1) dated 30/09/2022 disallowing a sum of Rs. being Interest Income derived from Cooperative Banks without appreciating that Cooperative Banks registered under Maharashtra Cooperative Societies Act, 1960 are Cooperative Society and as such Interest Income derived by the Appellant is eligible for deduction U/s 80P(2)(d) of the Act. and therefore disallowance ought to be deleted. 2. The Id C.I.T. (A) erred in not granting the relief U/s 80P(2)(d) despite the fact that the Society is eligible for Deduction under Chapter VIA r.w.s. 80AC of the Act insofar as the Return of Income was filed within the due date prescribed U/s 139(1) of the Act. Briefly stated, facts of the case are that the assessee filed its on 28.02.2022 declaring total income at after claiming deduction of Rs.12,05,883/ of interest from the Co-operative Bank in terms of section 80P(2)(d) tax Act, 1961 (in short ‘the Act’). The return was e Central Processing Centre, Bengluru and in the passed u/s 143(1) of the Act, the CPC denied claim of deduction u/s 80P(2)(d) of the Act. Aggrieved, the assessee filed appeal before the Ld. CIT(A) and submitted that issue in dispute overed in favour of the assessee by way of various decisions of ordinate Benches of the Tribunal, but the Ld. CIT(A) rejected the contention that interest received from co-operative bank was eligible for deduction for the reason that those co-operat operative society. The relevant finding of the Ld. CIT(A) is reproduced as under: 5.1.The Ground No. 1 of appeal is related to the non of deduction under Section 80P by the order u/s 143(1) passed by CPC with intimation date of 30.09.2022. The appellant has -operative Housing Society Ltd. 2 ITA No. 5581/MUM/2024 Intimation Order u/s 143 (1) dated 30/09/2022 disallowing a sum of Rs. being Interest Income derived from Cooperative Banks without appreciating that Cooperative Banks registered under Maharashtra Cooperative Societies Act, 1960 are Cooperative Society and as such Interest Income derived by the Appellant is eligible for deduction U/s 80P(2)(d) of the Act. and therefore 2. The Id C.I.T. (A) erred in not granting the relief U/s 80P(2)(d) Society is eligible for Deduction under Chapter VIA r.w.s. 80AC of the Act insofar as the Return of Income 139(1) of the Act. Briefly stated, facts of the case are that the assessee filed its on 28.02.2022 declaring total income at after claiming deduction of Rs.12,05,883/- in respect operative Bank in terms of section 80P(2)(d) tax Act, 1961 (in short ‘the Act’). The return was e Central Processing Centre, Bengluru and in the he CPC denied claim of deduction u/s 80P(2)(d) of the Act. Aggrieved, the assessee filed appeal before the Ld. CIT(A) and submitted that issue in dispute overed in favour of the assessee by way of various decisions of but the Ld. CIT(A) rejected operative bank was operative banks operative society. The relevant finding of the Ld. 5.1.The Ground No. 1 of appeal is related to the non-allowability of deduction under Section 80P by the order u/s 143(1) passed by CPC with intimation date of 30.09.2022. The appellant has claimed an amount of Rs. 12,05,883/ 80P of the Act. However, this deduction was disallowed in the above-mentioned order. 5.2. The appellant has claimed deduction under Section 80P. The relevant part of the Act is being reproduced below: \"80P(1) Where in the case of an assessee being a cooperati society, the gross total income includes any income referred to un sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub section (2), in computing the total income of the as * (2) The sums referred to in sub namely:- ….. (d). In respect of any income by way of interest or dividend derived by the cooperative society from its investments with any other cooperative society, the whole of 5.3. Whereas the entity mentioned in the Section 80P(2)(d) is Cooperative Society, but the appellant has claimed deduction for the interest earned from a Cooperative Bank. From the documents submitted during the proceedings, it is noted that t corresponding banks are (i) NKGSB Co Cooperative Bank Ltd iii) Maharashtra State Cooperative Bank (iv) Saraswat Cooperative Bank. The judicial pronouncements from different benches of Hon'ble ITAT claiming that since the Cooperative banks are also registered under Cooperative Societies Act therefore, they are also same as Cooperative societies for the purposes of Income Tax Act 1961, and more particularly Section 80P (2)(d). 5.4.In the case of appell brought to the Act with respect to the status of Cooperative banks. Section 80P(4) was introduced vide Finance Act 2006 w.e.f. from 01.04.2007. The relevant part of the Act is being reproduced below: \"(4) . The pro any co-operative bank other than a primary agricultural, credit society of a primary cooperative agricultural and rural development bank.\" Shrikumar Co- claimed an amount of Rs. 12,05,883/- as deduction under Section of the Act. However, this deduction was disallowed in the mentioned order. 5.2. The appellant has claimed deduction under Section 80P. The relevant part of the Act is being reproduced below: \"80P(1) Where in the case of an assessee being a cooperati society, the gross total income includes any income referred to un section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub section (2), in computing the total income of the assessee. * (2) The sums referred to in sub-section (1) shall be the following (d). In respect of any income by way of interest or dividend derived by the cooperative society from its investments with any other cooperative society, the whole of such income. 5.3. Whereas the entity mentioned in the Section 80P(2)(d) is Cooperative Society, but the appellant has claimed deduction for the interest earned from a Cooperative Bank. From the documents submitted during the proceedings, it is noted that t corresponding banks are (i) NKGSB Co-operative Bank (ii) SVS Cooperative Bank Ltd iii) Maharashtra State Cooperative Bank (iv) Saraswat Cooperative Bank. The appellant has relied upon many judicial pronouncements from different benches of Hon'ble ITAT laiming that since the Cooperative banks are also registered under Cooperative Societies Act therefore, they are also same as Cooperative societies for the purposes of Income Tax Act 1961, and more particularly Section 80P (2)(d). 5.4.In the case of appellant, it is important to note 2 amendments brought to the Act with respect to the status of Cooperative banks. Section 80P(4) was introduced vide Finance Act 2006 w.e.f. from 01.04.2007. The relevant part of the Act is being reproduced \"(4) . The provisions of this Section shall not apply in relation to operative bank other than a primary agricultural, credit society of a primary cooperative agricultural and rural development bank.\" -operative Housing Society Ltd. 3 ITA No. 5581/MUM/2024 as deduction under Section of the Act. However, this deduction was disallowed in the 5.2. The appellant has claimed deduction under Section 80P. The \"80P(1) Where in the case of an assessee being a cooperative society, the gross total income includes any income referred to un section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub- sessee. section (1) shall be the following (d). In respect of any income by way of interest or dividend derived by the cooperative society from its investments with any other 5.3. Whereas the entity mentioned in the Section 80P(2)(d) is Cooperative Society, but the appellant has claimed deduction for the interest earned from a Cooperative Bank. From the documents submitted during the proceedings, it is noted that the operative Bank (ii) SVS Cooperative Bank Ltd iii) Maharashtra State Cooperative Bank (iv) appellant has relied upon many judicial pronouncements from different benches of Hon'ble ITAT laiming that since the Cooperative banks are also registered under Cooperative Societies Act therefore, they are also same as Cooperative societies for the purposes of Income Tax Act 1961, and ant, it is important to note 2 amendments brought to the Act with respect to the status of Cooperative banks. Section 80P(4) was introduced vide Finance Act 2006 w.e.f. from 01.04.2007. The relevant part of the Act is being reproduced visions of this Section shall not apply in relation to operative bank other than a primary agricultural, credit society of a primary cooperative agricultural and rural The other is, the amendment of Section 194A(3)(v) of the Act excluding the Cc... operative banks from the definition of Co operative society by Finance Act, 2015. (v) to such income credited or paid by a cooperative society other than a cooperative bank to a member thereof or to such income credited or paid by a coop society.\" 5.5. Reliance is also placed on the judgment of Hon'ble Karnataka High Court in the case of PCIT v. The Totagars Co Society Sirsi in ITA No. 100066/2016 dated 16.06.2017. The relevant part o \"13. What Section 80P(2)(d) of the Act, which was though not specifically argued and canvassed before the Hon'ble Supreme Court, envisages is that such interest or dividend earned by an assessee co-operative societ with any other co Banks' are missing in clause (d) of subsection (2) of Section 80P of the Act. Even: though a co- skeleton of a coo different and that is the banking business, which is governed and regulated by the provisions of the Banking Regulation Act, 1949. Only the Primary Agricultural Credit Societies with their limited work of provi governed by the ambit and scope of deduction under Section 80P of the Act. 14. The banking business, even though run by a Co bank is sought to be excluded from the beneficial provisions of exemption or deduction under Section 80P of the Act. The purpose of bringing on the statute book sub Act was to exclude the applicability of Section 80P of the Act altogether to any co banking business income from such exemption / deduction category. The words used in Section 80P(4) are significant. are: \"The provisions of this section shall not apply in relation to any co-operative bank other than a primary agricultural credit society ..... \" The words \"in relation to\" and even the interest income earned by the respondent a co-operative Society from a Co Section 80P(4) of the Act even though without any amendme Section 80P(2)(d) of the Act is sufficient to deny the claim of the respondent assessee for deduction under Section 80P(2)(d) of the Shrikumar Co- The other is, the amendment of Section 194A(3)(v) of the Act xcluding the Cc... operative banks from the definition of Co operative society by Finance Act, 2015. to such income credited or paid by a cooperative society other than a cooperative bank to a member thereof or to such income credited or paid by a cooperative society to any other cooperative 5.5. Reliance is also placed on the judgment of Hon'ble Karnataka High Court in the case of PCIT v. The Totagars Co-operative Sale Society Sirsi in ITA No. 100066/2016 dated 16.06.2017. The relevant part of the judgment is being reproduced below: \"13. What Section 80P(2)(d) of the Act, which was though not specifically argued and canvassed before the Hon'ble Supreme Court, envisages is that such interest or dividend earned by an operative society should be out of the investments with any other co-operative society. The words 'Co Banks' are missing in clause (d) of subsection (2) of Section 80P of the Act. Even: - operative bank may have the corporate body or skeleton of a cooperative society but its business is entirely different and that is the banking business, which is governed and regulated by the provisions of the Banking Regulation Act, 1949. Only the Primary Agricultural Credit Societies with their limited work of providing credit facility to its members continued to be governed by the ambit and scope of deduction under Section 80P 14. The banking business, even though run by a Co bank is sought to be excluded from the beneficial provisions of ption or deduction under Section 80P of the Act. The purpose of bringing on the statute book sub-section (4) in Section 80P of the Act was to exclude the applicability of Section 80P of the Act altogether to any co-operative bank and to exclude the normal banking business income from such exemption / deduction category. The words used in Section 80P(4) are significant. are: \"The provisions of this section shall not apply in relation to operative bank other than a primary agricultural credit \" The words \"in relation to\" can include within its ambit and even the interest income earned by the respondent operative Society from a Co-operative Bank. This exclusion by Section 80P(4) of the Act even though without any amendme Section 80P(2)(d) of the Act is sufficient to deny the claim of the respondent assessee for deduction under Section 80P(2)(d) of the -operative Housing Society Ltd. 4 ITA No. 5581/MUM/2024 The other is, the amendment of Section 194A(3)(v) of the Act xcluding the Cc... operative banks from the definition of Co- to such income credited or paid by a cooperative society other than a cooperative bank to a member thereof or to such income erative society to any other cooperative 5.5. Reliance is also placed on the judgment of Hon'ble Karnataka operative Sale Society Sirsi in ITA No. 100066/2016 dated 16.06.2017. The f the judgment is being reproduced below: \"13. What Section 80P(2)(d) of the Act, which was though not specifically argued and canvassed before the Hon'ble Supreme Court, envisages is that such interest or dividend earned by an y should be out of the investments operative society. The words 'Co-operative Banks' are missing in clause (d) of subsection (2) of Section 80P of operative bank may have the corporate body or perative society but its business is entirely different and that is the banking business, which is governed and regulated by the provisions of the Banking Regulation Act, 1949. Only the Primary Agricultural Credit Societies with their limited ding credit facility to its members continued to be governed by the ambit and scope of deduction under Section 80P 14. The banking business, even though run by a Co- operative bank is sought to be excluded from the beneficial provisions of ption or deduction under Section 80P of the Act. The purpose section (4) in Section 80P of the Act was to exclude the applicability of Section 80P of the Act operative bank and to exclude the normal banking business income from such exemption / deduction category. The words used in Section 80P(4) are significant. They are: \"The provisions of this section shall not apply in relation to operative bank other than a primary agricultural credit can include within its ambit and even the interest income earned by the respondent-assessee, operative Bank. This exclusion by Section 80P(4) of the Act even though without any amendment in Section 80P(2)(d) of the Act is sufficient to deny the claim of the respondent assessee for deduction under Section 80P(2)(d) of the Act. The only exception is that of a primary agricultural credit society. The depository Kanara District Central Bank the present case is admittedly not such a primary agricultural credit society. 5.6.In view of the above, this Ground of appeal is dismissed 3. We have heard rival submissions of the parties and perused the relevant materials on record Court in the case of Kerala State Co Development Bank Ltd. if the co-operative bank is defined u/s 5(b) of the Act B co-operative bank shall be barred for deduction u/s 80P(2)(d) of the Act in view of prohibition u/s 80P(2)(4) of the Act operative bank not falling u/s 5(b) of the Act B shall be considered as co 80P(2)(d) of the Act. The Co case of GSSS Credit Co 249 & 250/Bang/2024 held similar finding. For ready referen said finding is reproduced as under: “12. Regarding the interest income earned from the Co this regard, we are of the opinion that we have to see whether the Co operative Bank is carrying on the business of bank as provided ITA No.248, 249 & 250/Bang/2024 under the Bank Regu words, if the Co then in our considered view, the deduction on account of interest on the investment made in such Co reason that such Co Hon'ble Supreme Court in the case of Agricultural and Rural Bank Ltd., Vs. ACIT 305, wherein it agricultural and rural development bank and governed under the Co-operative Societies Act, 1969 Shrikumar Co- Act. The only exception is that of a primary agricultural credit society. The depository Kanara District Central Bank the present case is admittedly not such a primary agricultural credit society. 5.6.In view of the above, this Ground of appeal is dismissed We have heard rival submissions of the parties and perused the relevant materials on record. We find that the Hon’ble Supreme Kerala State Co-Operative Agricultural & Rural Development Bank Ltd. [2023] 154 taxmann.com 305 (SC) operative bank is carrying out the business of banking defined u/s 5(b) of the Act Banking regulation Act then only such operative bank shall be barred for deduction u/s 80P(2)(d) of the Act in view of prohibition u/s 80P(2)(4) of the Act, otherwise the co ot falling u/s 5(b) of the Act Banking regulation Act onsidered as co-operative society eligible for deduction u/s 80P(2)(d) of the Act. The Co-ordinate Bench of the Tribunal in the case of GSSS Credit Co-operative Society Ltd. v. ITO in ITA No. 248, 249 & 250/Bang/2024 held similar finding. For ready referen said finding is reproduced as under: 12. Regarding the interest income earned from the Co-operative Bank, in this regard, we are of the opinion that we have to see whether the Co operative Bank is carrying on the business of bank as provided ITA No.248, 249 & 250/Bang/2024 under the Bank Regulation Act. In simple words, if the Co-operative Bank is not carrying out any banking business, then in our considered view, the deduction on account of interest on the investment made in such Co-operative Bank cannot be denied for the reason that such Co- operative Bank is not a bank as per the judgment of Hon'ble Supreme Court in the case of Kerala State Co Agricultural and Rural Bank Ltd., Vs. ACIT reported in 154 taxmann.com 305, wherein it was observed that the assessee was a state agricultural and rural development bank and governed under the operative Societies Act, 1969 as a co-operative society. The activity of -operative Housing Society Ltd. 5 ITA No. 5581/MUM/2024 Act. The only exception is that of a primary agricultural credit society. The depository Kanara District Central Bank Limited in the present case is admittedly not such a primary agricultural 5.6.In view of the above, this Ground of appeal is dismissed.” We have heard rival submissions of the parties and perused d that the Hon’ble Supreme Operative Agricultural & Rural [2023] 154 taxmann.com 305 (SC) held that the business of banking as anking regulation Act then only such operative bank shall be barred for deduction u/s 80P(2)(d) of the otherwise the co- anking regulation Act operative society eligible for deduction u/s ordinate Bench of the Tribunal in the operative Society Ltd. v. ITO in ITA No. 248, 249 & 250/Bang/2024 held similar finding. For ready reference, operative Bank, in this regard, we are of the opinion that we have to see whether the Co- operative Bank is carrying on the business of bank as provided ITA lation Act. In simple operative Bank is not carrying out any banking business, then in our considered view, the deduction on account of interest on the operative Bank cannot be denied for the operative Bank is not a bank as per the judgment of Kerala State Co-operative reported in 154 taxmann.com was observed that the assessee was a state-level agricultural and rural development bank and governed under the Kerala operative society. The activity of the assessee was to provide credit facilities to its members. Accordingly, the assessee claimed a deduction under the return of income. But the AO disallowed the same on the reas that the assessee was a cooperative bank and, therefore, it was hit by the provisions of section 80P(4) claiming deduction under reached the Hon'ble Apex Court where it was held that banking is defined under section 5(b) for the purpose of lending or investment, deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise. Therefore, a banking company must transact banking business with the publi business of banking as defined in operative bank within the meaning of and would be entitled to the benefit of deduction under the Act. Since, the assessee society was an apex co within the meani Banks Act, 1984 financial accommodation to its members ITA No.248, 249 & 250/Bang/2024 who members of the public, it was not a co of section 5(b) read with the deduction under Section 80P could not be denied to the assessee by invoking Section 80P(4) 13. In view of the above, we hold that if the Co functioning the business of banking as defined Regulation Act, then such Co operative Society for the purpose of the deduct the Act. Therefore, in our considered view, such interest income will be eligible for deduction 14. However, if the Co defined u/s 5(b) of the Bank Regulation Act, then the assessee shall not be entitled for the deduction with respect to the interest earned on the investments made with such bank un the Act. However, corresponding interest cost incurred by the assessee shall be eligible to be adjusted against such interest income at par with nationalized bank. 3.1 Accordingly, the matter is restored back to the file of the Assessing Officer for verifying whether the Co whom interest is received, Regulation Act or not accordance with law. The assessee may file necessary document in Shrikumar Co- see was to provide credit facilities to its members. Accordingly, the assessee claimed a deduction under Section 80P(2)(a)(i) the return of income. But the AO disallowed the same on the reas that the assessee was a cooperative bank and, therefore, it was hit by the section 80P(4) of the Act and thus would not be eligible for claiming deduction under section 80P(2) of the Act. Finally, the issue reached the Hon'ble Apex Court where it was held that banking is defined section 5(b) of the Banking Regulation Act, 1949 to mean accepting, for the purpose of lending or investment, deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise. Therefore, a banking company must transact banking business with the public. If a co-operative society would not transact the business of banking as defined in Section 5(b), it would not be a co operative bank within the meaning of section 56 of Banking Regulation Act and would be entitled to the benefit of deduction under Section 80P(2) the Act. Since, the assessee society was an apex co- operative society within the meaning of Kerala State Co-Operative Agricultural Development Banks Act, 1984 (State Act, 1984) whose primary object was to provide financial accommodation to its members ITA No.248, 249 & 250/Bang/2024 who were all other co-operative societies and not members of the public, it was not a co-operative bank within the meaning read with Section 56 of Banking Regulation Act. Accordingly, the deduction under Section 80P could not be denied to the assessee by Section 80P(4) of the Act. 13. In view of the above, we hold that if the Co-operative Bank is not functioning the business of banking as defined u/s 5(b) Regulation Act, then such Co-operative Bank shall be considered as Co operative Society for the purpose of the deduction claimed u/s 80P(2)(d) the Act. Therefore, in our considered view, such interest income will be eligible for deduction u/s 80P(2)(d) of the Act. 14. However, if the Co-operative Bank is carrying out banking activities as defined u/s 5(b) of the Bank Regulation Act, then the assessee shall not be entitled for the deduction with respect to the interest earned on the investments made with such bank under the provisions of sec. 80P(2)(d) the Act. However, corresponding interest cost incurred by the assessee shall be eligible to be adjusted against such interest income at par with nationalized bank.” Accordingly, the matter is restored back to the file of the Assessing Officer for verifying whether the Co-operative Banks whom interest is received, are registered u/s 5(b) of the Banking Act or not and thereafter shall decide the is . The assessee may file necessary document in -operative Housing Society Ltd. 6 ITA No. 5581/MUM/2024 see was to provide credit facilities to its members. Accordingly, Section 80P(2)(a)(i) of the Act in the return of income. But the AO disallowed the same on the reasoning that the assessee was a cooperative bank and, therefore, it was hit by the of the Act and thus would not be eligible for of the Act. Finally, the issue reached the Hon'ble Apex Court where it was held that banking is defined o mean accepting, for the purpose of lending or investment, deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise. Therefore, a banking company must transact banking operative society would not transact the , it would not be a co- of Banking Regulation Act Section 80P(2) of operative society Operative Agricultural Development ) whose primary object was to provide financial accommodation to its members ITA No.248, 249 & operative societies and not operative bank within the meaning of Banking Regulation Act. Accordingly, the deduction under Section 80P could not be denied to the assessee by rative Bank is not u/s 5(b) of Banking operative Bank shall be considered as Co- u/s 80P(2)(d) of the Act. Therefore, in our considered view, such interest income will be operative Bank is carrying out banking activities as defined u/s 5(b) of the Bank Regulation Act, then the assessee shall not be entitled for the deduction with respect to the interest earned on the sec. 80P(2)(d) of the Act. However, corresponding interest cost incurred by the assessee shall be eligible to be adjusted against such interest income at par with Accordingly, the matter is restored back to the file of the operative Banks from are registered u/s 5(b) of the Banking and thereafter shall decide the issue in . The assessee may file necessary document in support of its contention the grounds of appeal of the assessee are allowed for statistical purposes. Order pronounced in the open Court on Sd/ (RAHUL CHAUDHARY JUDICIAL MEMBER Mumbai; Dated: 21/01/2025 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Shrikumar Co- contention before the Assessing officer the grounds of appeal of the assessee are allowed for statistical Order pronounced in the open Court on 21/01/2025. Sd/- (RAHUL CHAUDHARY) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai -operative Housing Society Ltd. 7 ITA No. 5581/MUM/2024 before the Assessing officer. Accordingly, the grounds of appeal of the assessee are allowed for statistical /01/2025. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai "